It’s been a long cold summer for the cryptocurrencies, or at least it feels that way.
Looking at the chart of Bitcoin (BTC), last night’s close was within 2% of the close from the first quarter.
Last night’s close was also within 3.1% of the close from the last day of the second quarter (June 30)
Compare that to the 70% gains that Bitcoin made in the first quarter and it’s safe to officially call the Crypto summer boring.
Things are about to heat up though.
We’re about to see Bitcoin jump to life with a $10,000 - $15,000 rally if the chart plays out, all because of three east-to-follow technical triggers.
The chart below the price activity for Bitcoin over the last six months. Note that the starting point on the left is almost the same as the ending point on the right, with Bitcoin trading right about $61,000 per coin.
It's the trend lines that get very interesting on this and start to indicate that we're about to see a breakout to 70,000.
The 50-day moving average is the green line that is in the downtrend, which indicates that the intermediate term has a bearish outlook for Bitcoin. A good rule to follow is that if the 50 days moving lower, there's a two to three chance that the stock or security, Bitcoin in this case is going to close lower the next day.
That rule changes when you break above the 50-day moving average and it starts trending higher.
As of early trading on Friday. Bitcoin is challenging that $61,000 level, and a break above it will act as a catalyst as it will begin to draw technically driven algorithms and retail buyers into the market as buyers.
The second trigger for a 18% rally comes from Bitcoin’s 200-day moving average, the red line in the chart above.
The 200-day moving average is a longer term trend line that is widely watched by the market just as much as the 50 day moving average.
Today that trend line is bullish as it's in ascending pattern, indicating that prices have been trending slightly higher over the last 200 days.
Those same algorithms and retail traders that watch technical analysis will react very bullishly if Bitcoin moves above the 200-day moving average, currently sitting at $63,100.
So, we have two of the most watched technical trend lines getting ready to give a bullish signal, but there's a third trigger.
Remember that Volatility is an Investor’s Friend
Despite popular opinion, volatility is your friend. Volatility is nothing more than a measure of how fast something is moving higher or lower. If you can figure out which direction the volatility is more likely to go you can harness it for gains.
Those two pink lines, one above and one below the price of Bitcoin, Those are the current Bollinger Bands for Bitcoin. While they sound fancy in their calculation is a little more difficult. Bollinger Bands are a simple measure of volatility, or in this case, potential volatility.
When the Bollinger Bands have tightened around the security they are tracking – Bitcoin in this case – it’s a sign that there has been an unusually low amount of volatility, call it the quiet before the storm.
Now, volatility is not a measure of direction, just movement. That means the upcoming increase in volatility could take Bitcoin higher or lower. But it's the other two trendlines that we're looking at that are giving the indication of where we can expect the directional volatility to move Bitcoin.
That's what makes trading this technical setup so easy.
A move back below the $59,000 level will indicate that the volatility surge is favoring a move to the downside. In that case, a breakdown in Bitcoin would target a short-term drop to $55,000 where we have seen support for Bitcoin all summer.
For that reason, I set an exit on any short-term position at $59,000 and then wait for the technical to line up again.
Expect to see this pattern play out over the next week as we head towards a market that is likely to start moving a bit more in the last week of September.
We’ll talk about the September seasonality (again) on Monday, until then, keep your eyes on this easy technical trade on Bitcoin.
